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June 14, 2001


University Senate Matters, Nathan Hershey

On May 25 I attended a special meeting of the Senate budget policies committee, to which members of the Faculty Assembly were invited. The meeting was devoted primarily to an explanation of the University budgeting process by Art Ramicone, vice chancellor for Budget and Controller. Much of his presentation touched on employee compensation.

The University employs an incremental budgeting system. Risking oversimplification, this means that some new initiatives and enhancements to existing activities or functions are proposed, assumptions are made about revenue, particularly increases in tuition and the state appropriation, and a proposal is made regarding the percent of compensation increase for the coming year. The final decision on the amount of the compensation, as well as the final operating budget itself, to be submitted to the board, is made by the chancellor only after the amount of the state appropriation is known.

My reason for attending was to better understand the relationship between compensation increases and the rest of the University budget. The May 17 University Times described the differing views concerning the allocation of the increased compensation amount among the four components mentioned in the University salary policy. Components are 1) maintenance of real salary for satisfactory performance; 2) merit increases for better-than-satisfactory performance; 3) equity adjustments to overcome pay discrepancies, and 4) market adjustments to make Pitt salaries competitive. The policy states that the chancellor decides upon the allocation of the increased compensation to each component. Much of the May Faculty Assembly and Senate Council meetings consisted of views on how much should be devoted to maintenance of real salary. The administration's view, expressed by the chancellor and the provost, is that salary maintenance has no priority over the other components; therefore, the amount allocated to it need not match the previous year's Consumer Price Index increase. Since the 1995-96 fiscal year, in which there was a salary freeze, only in 1996-97 and 1998-99 did the maintenance of real salary component match the previous year's CPI.

By the conclusion of Art Ramicone's presentation, it was apparent that the budget process creates a conflict between the interest of employees in maintaining real salary and the students' interest in limiting yearly tuition increases as much as possible. If the compensation increase pool is small, and only a small portion of it is devoted to maintaining real salary, and the tuition increase is modest, the administration may also be pleasing the legislature, which is more interested in low tuition rates than higher salaries for University employees. The message to faculty and staff is that, in order to increase funds for salaries further, it would be necessary to increase the tuition rates. When the legislature and governor grant a larger increase in the state appropriation than the University's proposed budget assumes, that increase is not necessarily devoted either to increasing compensation or reducing the planned tuition increase, but may be used for other purposes. If used to increase compensation, the decision may be to not allocate any of it to salary maintenance.

Based on what I learned — perhaps it would be better to say had confirmed, because I didn't hear much at the BPC meeting that I did not know before — I have a few observations.

1) Having the budget process appear to pit tuition increases against compensation increases works to the advantage of the administration, in that it builds upon both faculty and staff desires that Pitt hold the line on tuition, and thereby make Pitt more attractive to potential students than some of the institutions with which we compete.

2) The University administration does not appear to direct much attention to the possible adverse effects of compensation increases for satisfactory performance that do not match the CPI increase. Many employees believe that satisfactory performance entitles them to no loss in real salary. In fact, for FY 2000-01, some faculty who received both a merit increase and the satisfactory performance increase did not receive a total increase that provided maintenance of real salary. Failure to maintain real salary with satisfactory performance causes frustration, disappointment and disaffection when it is not the result of a truly exceptional situation. It affects employee performance in ways that are difficult to quantify and measure, but are real nonetheless. I suspect that some faculty and staff, disillusioned by their inability to maintain real salary, reduce to some extent the effort they devote to their University responsibilities. A faculty member may elect to cut back on his/her time for mentoring students or reduce activity to remain current in his/her field. Neither response is readily observable, let alone readily measurable, by a department chairperson.

Some disaffected employees may begin to "work to the rule," strictly adhering to rules so that the worker becomes less productive than he/she is ordinarily. If questioned, the employee who "works to the rule" can easily justify such conduct by stating he/she is merely following the dictates of the organization.

3) The question of why the University has so little money available for yearly increments in its budget has been asked. Could not more be assigned from the endowment to the year's operating budget, given its recent growth, and thus increase the pool of funds available for increased compensation? Among the several reasons cited for not doing this is concern that the recent increases in the endowment, brought about by the performance of the equity markets, are not necessarily going to continue. The stock market's recent performance supports that view. Thus, Pitt has not followed the lead of some comparable institutions that have increased the contribution from their endowments to operating budgets. I do not know whether there are any readily available sources for increasing the yearly increments in the budget, but it is difficult to believe that the University administration passes up any opportunities to secure additional money. The key question is how it chooses to allocate the money it gets.

Finally, on more than one occasion a faculty member has told me that he/she makes no cash contributions to the University because, in the faculty member's view, he/she makes a contribution in-kind, given his/her low salary. Arguably, for satisfactorily performing employees whose increased compensation is less than the CPI increase, the difference constitutes a contribution in-kind to the University, and should be appreciated and recognized as such. Perhaps, when the total amount received through the Pitt Internal Campaign is arrived at each year, the report should show such contributions in-kind. Their total would be determined by calculating the difference between the amount of compensation increases received by satisfactorily performing faculty and staff and the amount of compensation they would have received if their increases had matched the CPI increase.

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